24/7 Wall St. Insights

• Rates are headed lower, and ultra-high-yield stocks are likely to trade higher.
• With inflation holding steady, dividend stocks will stay in demand.
• Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “7 Things I Demand in a Dividend Stock,” plus get our two best dividend stocks to own today. Access 2 legendary, high-yield dividend stocks Wall Street loves.

Investors love dividend stocks, especially the ultra-high-yield variety because they offer a significant income stream and have massive total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation.

Let’s take a closer look at the concept of total return. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend.

With the Federal Reserve commencing an interest rate lowering cycle that could easily last well into 2026, we decided to look at our 24/7 Wall Street ultra-high-yield dividend universe for stocks that pay big dividends and are admired across Wall Street. Five top companies hit our screens, and all look like solid ideas for growth and income investors with a somewhat higher risk tolerance level.

Why do we cover ultra-high-yield stocks?

While only suited for some for everybody, those who are trying to build strong passive income streams can do extremely well having some of these top companies in their portfolios. Paired with more conservative blue-chip dividend giants, investors can use a barbell approach to get passive income streams that can make a significant difference.

Alliance Resource Partners

This company is a leader in the thermal coal business, offers solid diversity, and a massive 12.17% yield. Alliance Resource Partners L.P. (NASDAQ: ARLP) is a diversified natural resource company that produces and markets coal primarily to utilities and industrial users in the United States.

The company operates through four segments:

• Illinois Basin Coal Operations
• Appalachia Coal Operations
• Oil & Gas Royalties
• Coal Royalties

It produces a range of thermal and metallurgical coal with sulfur and heat contents.

The company operates seven underground mining complexes in:

• Illinois
• Indiana
• Kentucky
• Maryland
• Pennsylvania
• West Virginia

In addition, it leases land and operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana, buys and resells coal, and owns mineral and royalty interests in approximately 1.5 million gross acres of oil and gas-producing regions, primarily in the Permian, Anadarko, and Williston Basins.

Further, the company offers various mining technology products and services, including:

• Data networks
• Communication and tracking systems
• Mining proximity detection systems
• Industrial collision avoidance systems
• Data and analytics software

Arbor Realty Trust

This stock trades at a ridiculous eight times estimated 2025 earnings and pays a massive 12.69% dividend. Arbor Realty Trust (NYSE: ABR) invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental, and commercial real estate markets in the United States.

The company operates in two segments:

• Structured Business
• Agency Business

Arbor Realty Trust primarily invests in:

• Bridge and mezzanine loans, including junior participating interests in first mortgages
• Preferred and direct equity and real estate-related joint ventures
• Real estate-related notes
• Various mortgage-related securities

The company offers:

• Bridge financing products to borrowers who seek short-term capital to be used in the acquisition of property
• Financing by making preferred equity investments in entities that directly or indirectly own real property
• Mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction
• Junior participation financing in the form of a junior participating interest in the senior debt
• Financing products to borrowers seeking conventional, workforce, and affordable single-family housing

Further, it underwrites, originates, sells, and services multifamily mortgage loans through conduit/commercial mortgage-backed securities programs.

Frontline

While off the radar of most investors, this shipping company could explode higher and pay a massive 11.38% dividend. Frontline PLC (NYSE: FRO) engages in the seaborne transportation of crude oil and oil products worldwide. It owns and operates oil and product tankers.

In a press release earlier this year, the company announced that it would sell its five oldest VLCCs (very large crude carriers), built in 2009 and 2010, for an aggregate net sale price of $290 million.

After repaying existing debt on the vessels, the transaction is expected to generate approximately $207 million in net cash proceeds.

The company expects to record a gain in 2024 of roughly $68 million to $76 million, depending on the delivery date of each vessel to the new owner. According to industry standards, the sale is subject to certain closing conditions.

Following the transaction and the completion of the delivery of all 24 VLCCs acquired from Euronav NV, Frontline’s fleet will consist of 84 vessels comprised of:

• 41 VLCCs
• 25 Suezmax tankers
• 18 LR2/Aframax tankers

FS KKR

This is a well-known name on Wall Street, offers a solid entry point at current levels, and pays a massive 14.09 dividend. FS KKR Capital Corp. (NASDAQ: FSK) is a business development company specializing in investments in debt securities. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments.

The company also seeks to invest in:

• First-lien senior secured loans
• Second-lien secured loans
• Subordinated loans
• Mezzanine loans

The firm also receives equity interests in connection with debt investments, such as warrants or options for additional consideration. It also seeks to purchase minority interests in common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor.

The fund may invest in corporate bonds and similar debt securities opportunistically.

The fund does not seek to invest in start-ups, turnaround situations, or companies with speculative business plans. It aims to invest in small and middle-market companies in the United States.

FS KKR seeks to invest in firms with annual revenue between $10 million to $2.5 billion. It aims to exit from securities by selling them in a privately negotiated over-the-counter market.

Mach Natural Resources

This 2023 IPO is trading below the initial offering price. Mach Natural Resources L.P. (NYSE: MNR) recently conducted a secondary offering to purchase more producing assets and will pay an estimated 13% dividend.

Mach Natural Resources is an independent upstream oil and gas company focused on acquiring, developing, and producing oil, natural gas, and natural gas liquids reserves in the Anadarko Basin region of Western Oklahoma, southern Kansas, and the Texas panhandle.

The analysts at Raymond James noted that Mach is led by Tom Ward, Co-Founder of Chesapeake Energy. Mach is another entrant into the E&P MLP space. It is a pure-play operator in the Anadarko Basin, leveraging its strong position (1 million net acres) to become the primary consolidator in the region.

The company’s midstream position and lower base decline (~20%) allow it to target a lower reinvestment rate (~30%) relative to the overall industry. In addition, it is one of the only exploration and production companies organized as a limited partnership as it is an oil and gas producer.

Oil Near 18-Month Low and Ultra-High-Yield Energy MLPs Are On Sale

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